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Hong Kong, South Africa Sign DTA

by Mary Swire, Tax-News.com, Hong Kong

21 October 2014


On October 16, Hong Kong and South Africa signed a comprehensive double taxation agreement (CDTA) – the 31st such agreement that Hong Kong has concluded.

Welcoming the agreement, Hong Kong's Secretary for Financial Services and the Treasury, K C Chan, said that it sets out the allocation of taxing rights between the two jurisdictions and will help investors better assess their potential tax liabilities from cross-border economic activities. He added, therefore, that the CDTA should offer added incentives for companies in South Africa to do business or invest in Hong Kong, and vice versa.

The agreement guarantees that income should be subject to the tax rules of a single state. Currently, the profits of Hong Kong companies doing business through a permanent establishment in South Africa may be taxed in both places if the income is Hong Kong-sourced. Under the CDTA, double taxation will be avoided in that any South African tax paid by the companies will generally be allowed as a credit against the tax payable in Hong Kong in respect of the income.

Under the new agreement, South Africa's withholding tax on royalties, currently 15 percent, will be capped at 5 percent, its withholding tax on dividend income will be reduced from 15 percent to either 5 or 10 percent, depending on the percentage shareholding, and South Africa's withholding tax on interest will be capped at 10 percent.

The DTA also includes provisions in line with international standards on the exchange of information in tax matters.

TAGS: South Africa | tax | business | double tax agreement (DTA) | royalties | corporation tax | agreements | tax rates | withholding tax | Hong Kong | dividends | individual income tax | Africa

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